Bernard Ginns: Entrepreneurs can be a dream for journalists but a nightmare for shareholders

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IN A corporate world dominated by rent-seeking professional managers and stuffy, risk-averse investors, true individuals are few and far between.

Entrepreneurs stand out a mile, especially if they are as unpredictable, unconventional and maverick as Rahul Yadav.

He is the co-founder and chief executive of Housing.com, one of the world’s fastest-growing online real estate websites and one of India’s most-watched start-ups.

The Mumbai-based company has been through five rounds of funding and attracted backing from some heavyweight investors including Softbank, Falcon Edge and Qualcomm Ventures.

Mr Yadav sounds like a dream for business journalists dream but a nightmare for shareholders; as disruptive in person as his company is in its sector. (Remind you of anyone in Yorkshire?)

Last Wednesday, he pledged to gift his 4.5 per cent stake, worth nearly $25m, to the company’s 2,251 employees.

He said: “I’m just 26 and it’s too early in life to get serious about money… every employee of Housing.com is now a company shareholder!”

Mr Yadav called on the founders of other Indian start-ups to “continue this noble act… and give half their shares to employees”.

Others did not follow suite. The founder of taxi app Ola mocked his countryman, saying “give that man a biscuit”, according to The Times of India.

The headline-grabbing gesture came weeks after Mr Yadav criticised his shareholders and board members for lacking “intellectual capability” in a resignation letter that was later withdrawn.

“I think it’s an impulsive decision by an immature person,” sniffed one investor of Mr Yadav’s plan to gift shares to employees. I doubt the staff will share that sentiment.

His story reminded me of Dan Price, the founder and chief executive of Gravity Payments, the Seattle-based merchant services provider, who last month announced that he was cutting his $1m salary to $70,000 to help fund a pay rise for all of his 120 employees.

The company will also use 75 to 80 per cent of its anticipated $2.2m annual profit to bring all staff up to a minimum salary of $70,000 (£48,000) from $35,000 (£22,000). Around 30 will see their salaries double.

His inspiration came from an academic study published by the US National Academy of Sciences about happiness which found that emotional well-being rises with income, but there is no progress beyond $70,000 a year.

Mr Price voiced concerns about the pay gap in the US, where CEOs make around 300 times what the average worker earns.

“The market rate for me as a CEO compared to a regular person is ridiculous, it’s absurd,” he told The New York Times.

The Grey Lady noted this was much, much higher than the 20-to-1 ratio recommended by the likes of 19th century tycoon J Pierpoint Morgan and 20th century management guru Peter Drucker.

We are not doing much better in the UK. According to the High Pay Centre, FTSE 100 chief executives are paid at least 160 times that of the average full-time UK worker, compared to about 60 times in the late 1990s.

Even Simon Walker, head of the Institute of Directors and no champion of redistributionist policies, has said that “in some corners of corporate Britain pay for top executives has become so divided from performance that it cannot be justified”.

Mr Walker said: “Runaway pay packages, golden hellos, and inflammatory bonuses are running the reputation of business into the ground.

“Large companies need to look closely at the role excessive pay is playing in fuelling an anti-business backlash from the public and some politicians.”

I would like to see more examples like those of Mr Yadav and Mr Price. They help counter negative public opinions of business and ultimately keep the pitchforks from the gates.